China Securities Regulatory Commission, Several Provisions for the Pilot Project for the Spinning Off and Listing of Subsidiaries Domestically by Listed Companies

(1)       the shares of the listed company having been listed domestically for at least three years;

(2)       the listed company having been profitable for the last three consecutive fiscal years and the aggregate net profit inuring to the listed company's shareholders during the last three fiscal years, minus the net profit of the Subsidiary to be spun off based on the equity corresponding thereto, not being less than Rmb600 million (for the purposes of these Provisions, net profit is calculated based on whichever is lower before and after subtracting non-recurring gains and losses);

(3)       the net profit of the Subsidiary to be spun off based on the equity corresponding thereto as indicated on the listed company's consolidated statements for the last fiscal year not exceeding 50% of the net profit inuring to the listed company's shareholders; and the net assets of the Subsidiary to be spun off based on the equity interests corresponding thereto as indicated on the listed company's consolidated statements for the last fiscal year not exceeding 30% of the net assets inuring to the listed company's shareholders;

(4)       the funds or assets of the listed company not having been appropriated by the controlling shareholder, de facto controller or an affiliate thereof and there not being other material affiliated transactions that harm the interests of the listed company; the listed company, its controlling shareholder or de facto controller not having been imposed administrative penalties by the China Securities Regulatory Commission (CSRC) during the past 36 months; the listed company, its controlling shareholder or de facto controller not having been publicly reprimanded by the shares exchange during the past 12 months; and the chartered accountant having issued unqualified audit reports for the listed company's most recent financial accounting report and financial accounting report for the most recent year;

(5)       the business and assets invested in by the listed company with the shares issued and the proceeds raised therefrom during the past three fiscal years not serving as the main business and assets of the Subsidiary to be spun off, unless the proceeds used by the Subsidiary to be spun off during the past three fiscal years do not in total exceed 10% of its net assets; the business and assets purchased by the listed company through material asset restructurings during the past three fiscal years not serving as the main business and assets of the Subsidiary to be spun off; if the Subsidiary mainly engages in finance business, the listed company may not spin off and list the same;

(6)       the total number of shares of the Subsidiary to be spun off held by the directors, senior management personnel and affiliated persons of the listed company not exceeding, in total, 10% of the total share capital of the Subsidiary before the spin-off and listing; and the total number of shares of the Subsidiary to be spun off held by the directors, senior management personnel and affiliated persons of such Subsidiary not exceeding 30% of the total share capital of the Subsidiary before the spin-off and listing; and

(7)       the listed company shall fully disclose and show: that the contemplated spin-off will be conducive to making its main business prominent and strengthening its independence; that after the spin-off, the listed company and the Subsidiary to be spun off will be in compliance with the regulatory requirements of the CSRC and shares exchange in respect of intra-industry competition and affiliated transactions, that, in terms of assets, financial affairs and organization, they will be mutually independent, that there will not be concurrent service between their senior management personnel and financial personnel and that there are no other serious defects in terms of their mutual independence (Article 1).